Ex-Citi CEO defends "dancing" quote to U.S. panel

NEW YORK, April 8 (Reuters) - Charles “Chuck” Prince’s infamous comment that his bank was “still dancing” even as the the subprime crisis worsened came back to haunt him on Thursday.

The former Citigroup Inc (C.N) chief executive’s explanation seemed to boil down to: it was a race to keep up with competitors who kept loosening lending standards and Citi couldn’t afford to drop out.

In July 2007, Prince told the Financial Times that global liquidity was enormous and only a significant disruptive event could create difficulty in the leveraged buyout market. “As long as the music is playing, you’ve got to get up and dance,” he said. “We’re still dancing.

The U.S. congressional panel investigating the origins of the worst U.S. financial crisis since the Great Depression pressed Prince about his comment, which has become emblematic of banks’ failure to come to grips with the gravity of the crisis.

Prince told the Financial Crisis Inquiry Commission on Thursday during questions after his testimony, “The quote itself related to the leveraged lending business, and I specifically asked the regulators if they would take action in regard to that.”

Prince said that at that time “private equity firms were driving very hard bargains with the banks, and at that point in time the banks individually had no credibility to stop participating in this lending business.”

“It was not credible for one institution to back away from this leveraged lending business,” he said. “The regulators had an interest in tightening up lending standards.”

Prince looked tense and uncomfortable as the commission grilled him.

“This was about leveraged lending. It had nothing to do with the mortgage business,” Prince said, referring to the quote. “It had nothing to do with the CDO business. It had nothing to do with the issues that we’ve been talking about here,” he said.

A few months after the Financial Times interview, in November, Prince resigned. (Reporting by Maria Aspan)